Dems protest Bush's surprise veto of defense bill

At the behest of the Iraqi government, President Bush has vetoed the annual defense authorization bill, saying an obscure provision in the legislation could make Iraqi assets held in U.S. banks vulnerable to lawsuits.

The veto startled Democratic congressional leaders, who believe Bush is bowing to pressure from the Iraqi government over a provision meant to help victims of state-sponsored terrorism. The veto was unexpected because there was no veto threat and the legislation passed both chambers of Congress overwhelmingly.

Democratic leaders say the provision in question could easily be worked out, but in vetoing the massive defense policy bill, some military pay raises may be on hold, as well as dozens of other programs. The White House contends that pay raises could be retroactive to Jan. 1 if the legislation is fixed.

"We understand that the president is bowing to the demands of the Iraqi government, which is threatening to withdraw billions of dollars invested in U.S. banks if this bill is signed," said House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.), in a joint statement. “The administration should have raised its objections earlier, when this issue could have been addressed without a veto."

The dispute could be settled in late January when Congress returns if Democratic leaders agree to tweak the language before sending the bill back to the White House.

At issue is a provision deep in the defense authorization bill, which would essentially allow victims of state sponsored terrorism to sue those countries for damages. The Iraqi government believes the provision, if applied to the regime of Saddam Hussein, could target up to $25 billion in Iraqi assets held in U.S. banks. Iraq has threatened to pull all of its money out of the U.S. banking system if the provision remains in the bill.

The defense authorization bill is less well known military legislation because it does not appropriate the hundreds of billions for Pentagon affairs, but it is a critical annual bill because it provides the policy road map for the year and sets spending levels for the Pentagon.

White House spokesman Scott Stanzel said the disputed provision "would permit plaintiffs’ lawyers immediately to freeze Iraqi funds and would expose Iraq to massive liability in lawsuits concerning the misdeeds of the Saddam Hussein regime. The new democratic government of Iraq, during this crucial period of reconstruction, cannot afford to have its funds entangled in such lawsuits in the United States."

Two senior administration officials, speaking during a Friday afternoon conference call, said the Iraqi government brought the provision to the attention of the administration. The Iraqi government, as well as the White House, believe it would be unfair to strip lawsuit immunity from the Iraqi government while U.S. civilians and contractors have been given protection from liability while operating in the war zone. The way the provision is written, Iraqi assets could potentially be frozen as soon as a lawsuit is filed, regardless of the merits of the suit.

The senior White House officials, who spoke to reporters on the condition of anonymity, said Sen. Frank Lautenberg (D-N.J.), was responsible for the amendment that would allow such lawsuits by victims of Saddam Hussein.

Senate Armed Services Chairman Carl Levin (D-Mich.) was angered that the White House decided on a veto long after the bill passed both chambers of Congress.

"It is unfortunate that the administration failed to identify the concerns upon which this veto is based until after the bill had passed both houses on Congress and was sent to the President for signature," Levin said. "I am deeply disappointed that our troops and veterans may have to pay for their mistake and for the confusion and uncertainty caused by their snafu.”

What is so unusual about this pending veto is that the White House almost always telegraphs a veto threat while a bill is under consideration so that changes can be made to the legislation to avoid a veto. This defense bill passed the House 370-49 and cleared the Senate on a 90-3 vote. According to Democratic leadership aides, the Bush administration did not raise any objections about the section in question until after the bill was transmitted to the White House.

Lautenberg contends that his provision is aimed at holding countries like Iran responsible for state sponsored terrorism, including the bombing of the Marine barracks in Beruit in 1983. The measure would allow plaintiffs to target hidden commercial assets owned by countries that sponsor terrorism, and the language is not aimed at Iraq specifically. The Lautenberg amendment has 30 cosponsors, including a handful of conservative Republicans like Sen. Richard Burr (R-N.C.), Sen. Jim DeMint (R-S.C.) and Sen. James Inhofe (R-Okla.).

“My language allows American victims of terror to hold perpetrators accountable — plain and simple,” Lautenberg said. “After months of negotiations over this bill, it is hard to understand why President Bush would suddenly veto this bipartisan proposal at the last minute. The President should be listening to the pleas of Americans victims of terror and their families and should help give them the justice they deserve.”

UPDATE: A spokeswoman for the families of the Marines killed in the 1983 Beirut bombing issued a statement Friday afternoon saying she was disappointed with the veto.

"We have waited and wept and prayed and worked for 24 long years for justice," said Lynn Smith Derbyshire, whose brother was killed in the Beirut attack. "We implore President Bush and all our national leaders to remember that the goal of these provisions is to hold terrorists accountable for their actions."